Months after IPO, Uber’s quarterly loss tops $5bn

The ride-sharing company racked up 100 million customers by July, but for every dollar brought in, it lost roughly $1.65

Uber Technologies Inc., in its financial report Thursday, failed to surpass analysts’ expectations in the way its hometown rival did the day before, sparking a selloff in after-hours trading. Uber’s second-quarter adjusted sales fell short of estimates, and it posted an eye-watering $5.24 billion net loss.

Most of that loss was attributed to stock-based compensation associated with the initial public offering in May, a routine expense for newly public companies. The adjusted loss—a more commonly used metric for ride-hailing companies, which excludes interest, tax and other expenses—more than doubled to $656 million but wasn’t as large as the $979.1 million average of analyst estimates compiled by Bloomberg.

Uber generated $2.87 billion in adjusted revenue for the second quarter, a 12% increase from a year earlier and below the $3.05 billion that analysts had expected for the quarter. Gross bookings, an important number to track ride-hailing demand, rose 31% to $15.76 billion.

On Wednesday, Lyft Inc. reported loss and revenue figures that both exceeded estimates and boosted its annual forecast. Lyft also indicated that the price war with Uber is abating and that the company expects to lose less this year than in 2018, which was welcome news to investors. Both stocks saw a bump as a result, with Uber up 8.2% to $42.97 at the close of trading Thursday.

Uber’s gains were wiped out in extended trading Thursday. The stock fell as much as 13% after the report.

Dara Khosrowshahi, Uber’s chief executive officer, said investors should expect to see losses decline next year. “We think that 2019 will be our peak investment year,” he said on a call with reporters Thursday. “In 2020, 2021, you’ll see losses come down.”

Uber didn’t provide a forecast in its report, nor did it do so in its first financial report in May. But Khosrowshahi confirmed that the battle for ride-hailing market share was easing. “We’re definitely seeing the competitive environment improve,” he said.

Uber hasn’t even been public for three months, but investors are wondering how long it can keep growing. The San Francisco-based company said last week that it’s cutting about 400 employees in marketing, and Khosrowshahi suggested the business had a broader problem with bloat.

On the call Thursday, Khosrowshahi acknowledged those questions while defending Uber as a business with “growth rates that companies at our scale would kill for.” However, he said, “the law of large numbers at some point will catch up with you.”

SOURCE: By Eric Newcomer • Bloomberg